Gateway and Juno on Wednesday settled Federal Trade Commission charges that their advertisements touting "free" Internet access were deceptive.
The companies reached consent agreements with the FTC, the government's top consumer watchdog, acknowledged that their advertisements of "free" Internet access service failed to fully inform consumers of possible long-distance charges.
The FTC charge said many consumers who attempted to cancel Juno's service were forced to wait long periods before reaching customer service representatives.
The FTC also charged that Juno made it difficult for subscribers to cancel the free trial, causing consumers to be billed for service they no longer wanted.
Among the alleged false advertising: Juno's free trial period touting 150 free hours of premium Internet service, but failing to disclose consumers had only one month to use them.
Juno agreed to stop using deceptive ads and said it would reimburse some subscribers for long-distance charges.
Among the terms of the consent agreement, Juno and Gateway were barred from future misrepresentations about prices, cancellation terms and the duration of free trial periods. The agreement with Juno prohibits the company from beginning a free trial period or billing cycle for any Internet service until the consumer can use the service.
Gateway was required to compensate customers for any charges incurred by Internet access customers using its service between January and April 1999, before consumers were adequately warned of the fee for calling.
Gateway's share price fell 6 cents to $17.69, while Juno's share price rose 5 cents to $1.48
The FTC said the volume of complaints received showed "free" Internet access "turned out too good to be true for many consumers".
An FTC spokeswoman said the decision would ensure "more consumers don't get taken for a ride on the Internet highway when it comes to the true cost of Internet access".
Peronet Despeignes, Financial Times. May 15, 2001
Copyright © The Financial Times Limited 2001. All rights reserved.